Tuesday, March 21, 2017

Size Matters

The new beer still at the Bulleit Distillery in Shelbyville.

You may have heard that bourbon is booming. Over the last decade, most of the majors have increased their production capacity to satisfy exploding demand. More recently, many new distilleries have opened or are in progress, such as Diageo's new Bulleit Distillery, which debuted last week.

It is hard to get a handle on what all of this means to industry-wide capacity and actual production volume going forward. Right now, demand is outpacing supply, but supply is racing to catch up as fast as it can, considering the limitations of the bourbon aging cycle.

Yes, the big distilleries have all gotten bigger and many of the new distilleries are big too. How big? Let's put that in perspective.

To compare the capacity of bourbon distilleries, one specification is paramount: the diameter of the beer still. The actual day-to-day operational capacity can be limited by other specifications such as grain handling capacity, the size and number of cookers and fermenters, boiler capacity, and warehouse capacity, but the ultimate bottleneck in the system is the beer still.

A beer still cannot be enlarged. To increase capacity you have to buy either a bigger one or an additional one and they are expensive.

Since Diageo is the world's largest distilled spirits company and since it hasn't had an operating distillery in Kentucky for nearly 20 years, everyone assumes the new Bulleit Distillery in Shelbyville is huge.

It isn't small, but that is where perspective is needed.

The new beer still at Bulleit, pictured above, is 42 inches in diameter. That's big, but how big compared to other producers?

The largest whiskey distillery in America, as you probably know, is Jack Daniel's in Tennessee. Jack operates six beer stills at the Lynchburg distillery, all of them bigger than Bulleit's one. With one exception, the biggest stills used for American whiskey are 72 inches in diameter. Jack has two of those behemoths, plus four 54-inch columns.

The next-largest producer of American whiskey is Beam Suntory, operating three distilleries in Kentucky. They also have multiple stills, all of them bigger than the one at Bulleit. They have one 72-inch beer still at Clermont and two at Booker Noe in Boston. Their Maker's Mark Distillery in Loretto uses three 36-inch columns. (They call it "purposeful inefficiency.")

Heaven Hill has two at 60 inches each, with a third one that size coming on line this summer. Heaven Hill, like Maker's Mark, has found that the best way to increase capacity while maintaining a consistent flavor profile is to build a new distillery exactly like the existing one.

The Brown-Forman Distillery in Shively has two stills, one at 48 inches and one at 60 inches. They are building a new distillery in downtown Louisville, specifically for their Old Forester brand, and it will have a 24-inch beer still.

Everyone other than the Big Three has just one beer still. At Buffalo Trace it is the mother of all beer stills, at 84 inches. Sazerac's other distillery, Barton 1792, has one at 72 inches. The beer still at Wild Turkey is 60 inches in diameter. While I don't have numbers for MGPI and Four Roses, they are in that same neighborhood.

Among the slew of new and rehabilitated distilleries, O. Z. Tyler in Owensboro is the largest, with a new 54-inch column. It has been making whiskey since August.

The still at Bulleit is exactly the same size as the one at Diageo's other American whiskey distillery, George Dickel; 42 inches. Diageo, the biggest distiller in the world, is the smallest major in terms of its U.S.-based distilling, even with the new facility.

Now we get to stills that are smaller than Bulleit's. Bardstown Bourbon Company, which also started to distill last year, has a 36-inch beer still. The under-construction Lux Row (Luxco) Distillery nearby is the same.

In Louisville, Michter's and Angels Envy check in at 32 and 28 inches respectively.

In addition to Old Forester, the distilleries sporting 24-inch stills include Castle & Key, Willett, New Riff, and Fulton County.

If you don't see your favorite distillery on this list, you can be confident that its capacity is less than those listed above.

Diageo says the annual capacity of Bulleit is 1.8 million proof gallons. (A 'proof gallon' is one gallon of 100° proof spirit.) Back in the day, that was about the size of a 'starter' commercial distillery. Most of the new distilleries going up today are smaller than Bulleit and although hundreds of new distilleries have opened in the last decade, the vast majority are tiny. Now and for the foreseeable future, the majors we know and love will produce most of the liquid we drink. Their hegemony is not threatened.

But nothing is carved in stone. Diageo is already talking about expansion at Bulleit. Many of the new distilleries that had planned to ramp up their production over years are reaching capacity in a few months. Louisville's Vendome, which makes virtually all of the big column stills used in American whiskey distilleries, has never been busier. Likewise the small group of builders and engineers who do most of the distillery work. There is no sign that anything is slowing down.

In the end will it be enough or too much? Your guess is as good as mine.

NOTE: (March 22, 2017) Based on information subsequently received from producers, I have made some updates to what was posted yesterday. If you own a distillery that belongs on this list, please contact me.

15 comments:

It is well and fine for whisky producers that demand outstrips the possible supply … even if there are some NAS-ty concomitant phenomenons.

What you see in the US at the moment – and I know that this movement is not so recent – we did see in Scotland from 2005 on.There distilleries switched to 24/7 production and when it became clear that this will not suffice new and huge Scottish distilleries were build. Craft-like small ones continue to be announced which is something that is a biogger movement in the US.While the Irish are in the state of pushing the number of their distilleries from 3 – in words three – in 1987 to more than 30 currently only Japan is not expanding on a large scale.

Meanwhile all the promises of the wonderous emerging markets for whisky and the expected development of said markets proves more and more as over-optimistic.As Russia lost its momentum China stepped down on „little niceties“ among business partners markets like Brazil fell victim to recession and worse of all India just will not drop its punitive and protectionist import tarrifs and – to add insult to injury – experiments with prohibition within the Indian federation, the Scots have reacted.Distilleries go back to a 5 day production circle and extend fermentation times again huge new planned distilleries are put on the shelf and money is held back where investments had been promised.

From here it looks like US whiskies are the main competitors for Scotch in the US with single malts gaining on their blended brethren in the US market as well. But still America is the larges whisky market.

In 2015 the world wide consumption of alcohol has declined marginally but it did for the first time in 15 years and marketwatch.com reported in May 2016 „The world is drinking less alcohol — except Americans“.

So – if we consider that there still are other spirits around like vodka cognac gin tequilla rum or whatever you like to think of – who is going to drink all that alcohol?

Good round-up of the most well known projects, however, you missed Middle West Spirits in Columbus Ohio. 24" vendome with doubler, attached to two additional specialty stills with annual capacity of ~3M pgs across spirit types. The new expanded plant came back online in 2016 and produces the company's craft brands... as well as a portfolio of contract customers.

Once this bubble bursts, I imagine we will be enjoying premium American whiskies at dirt cheap prices. When that will happen is anyone's guess,but I believe it will be within twelve years. 12-18 year old single barrel cask strength bourbon for $35; maybe less.....yes Please.

There is currently massive ethanol production to turn corn into fuel. Should the winds from Washington blow a different direction concerning ethanol blend for automobiles, will this have any influence on ethanol available for barrels?

Not really. There is no shortage of corn for whiskey production and whiskey will always be a 'higher use' than fuel, so corn will be available for whiskey even if it becomes too costly to use as fuel. If more corn becomes available because of less fuel ethanol production, all the better.

Crown Point Marc, I fear your optimism is misplaced. People have been saying the same thing about wine prices for 30 years, and yet they keep going up. Whiskey's position in society has shifted dramatically over the last 15 or 20 years. We're never going to see Van Winkle or BTAC bottles sitting on the shelf for weeks and months again. The one thing we might eventually see again is more readily available extra-aged whiskey (15+ years), although obviously it will be much more expensive than the last time.

I look forward to seeing where Diageo can go with the new Distillery in terms of quality and consistency. As a start up operation, the strategy of taking a responsible approach to scale up should be applauded. Often times the desire to meet market demand often cheapens the product and results in disappointed consumers.